10) If indifference curves are concave to the origin, then at equilibrium: A) The indifference curve is tangent to the budget constraint. B) The consumer buys one good. C) The consumer buys a basket of goods. D) None of the above.
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10) If indifference curves are concave to the origin, then at equilibrium:
A) The indifference curve is tangent to the budget constraint.
B) The consumer buys one good.
C) The consumer buys a basket of goods.
D) None of the above.
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- Susan buys bagels and falafels. The price of a falafels is £1 and the price of a bagels is £3. Susan has £12 to spend on bagels and falafels. a) Draw Susan's budget constraint and a possible indifference curve. Explain the assumptions behind the shape of the indifference curve you have drawn. b)If the price of falafels falls to £0.80 each, how will this affect her purchases? Answer in words and graphically, clearly indicating income and substitution effects of the price change. c) If Susan only enjoys bagels and falafels when she has 2 falafels for every bagel that she eats, draw her indifference curves. How many bagels and falafels should she buy to maximise her utility? Assume Susan has £12, one falafel costs £0.80 and bagels costs £3 each. d) Susan's friend Declan grows 100 potatoes each year and all of his income comes from selling them. He spends all of his income each year consuming potatoes and other goods. For Declan, potatoes are a Giffen good, in that for a given income his…Draw two axes: on the horizontal axis (x-axis), represent the quantity of good x, and on the vertical axis (y-axis), represent the quantity of good y. Plot the initial budget line. The equation for the budget line is m = px * x + py * y. You can rearrange it to solve for y: y = (m - px * x) / py. With given values for m, px, and py, you can plot the line that represents all combinations of goods x and y that the consumer can afford. Plot the indifference curves. These curves represent the combinations of goods x and y that give the consumer the same level of utility. Due to the complexity of the given utility function U(x, y) = xy / (x + y), it may be challenging to plot the exact indifference curves. As an alternative, you can use a simpler utility function for demonstration purposes, such as U(x, y) = x^a * y^b (where a and b are positive constants), which results in easier-to-plot curves. Locate the initial optimal consumption bundle, which is the point where the budget line is…Given above are some of the indifference curves for a student who consumes Burritos and Pizzas and the relevant budget line. Equilibrium is defined as the maximum utility or satisfaction given the consumer’s budget. The consumer has more indifference curves above I3, below I1, and between I1 and I2 and between I2 and I3. Out of all the indifference curves the consumer has, only I1, I2, and I3 are shown. The given budget line touches I2 at the point where I2 touches the y-axis (Burritos axis). (a) What is the point of consumer equilibrium in the above graph where the consumer is maximizing utility (satisfaction) given the budget line. Please show the point and label it as “A”. (b) At the equilibrium point how much Pizza does the student consume? (c) If the price of Pizzas decreased and the price of Burritos remained unchanged, would the quantity of Pizzas consumed at equilibrium increase or decrease compared to the equilibrium point A in the graph given above? (d) If the…
- Given above are some of the indifference curves for a student who consumes Burritos and Pizzas and the relevant budget line. Equilibrium is defined as the maximum utility or satisfaction given the consumer’s budget. The consumer has more indifference curves above I3, below I1, and between I1 and I2 and between I2 and I3. Out of all the indifference curves the consumer has, only I1, I2, and I3 are shown. The given budget line touches I2 at the point where I2 touches the y-axis (Burritos axis). a) If the price of Pizzas decreased and the price of Burritos remained unchanged, would the quantity of Burritos consumed at equilibrium increase or decrease compared to the equilibrium point A in the graph given above? (b) If the price of Pizzas increased and the price of Burritos remained the same, would the consumer equilibrium point be different from point A or the same as point A in the graph given above?U(x, y) = xayb A consumer maximises utility subject to a budget constraint M = Pxx+Pyy Where px is the price of good x, py is the price of good y and M is the budget available. a. Derive an expression for the marginal utility of x. Under what condition is the marginal utility diminishing. b. Derive an expression for the marginal utility of y. Under what condition is the marginal utility diminishing.Donald likes fishing (X1) and hanging out in his hammock (X2). His utility function for these two activities is u(x1, x2) = 3X12X24. (A) Calculate MU1, the marginal utility of fishing. (B) Calculate MU2, the marginal utility of hanging out in his hammock. (C) Calculate MRS, the rate at which he is willing to substitute hanging out in his hammock for fishing. (D)Last week, Donald fished 2 hours a day, and hung out in his hammock 4 hours a day. Using your formula for MRS from (c) find his MRS last week. (E) This week, Donald is fishing eight hours a day, and hanging out in his ham mock two hours a day. Calculate his MRS this week. Has his MRS increased or decreased? Explain why? (F) Is Donald happier or sadder this week compared to last week? Explain.
- i) Derive consumer's budget constraint ii) Derive the marginal utility X and marginal utility Y iii) Find out the consumer optimum combination of good X and Y at the market.21. A consumer has a utility function defined over two goods X and Y. Let the quantity of Good X be x ≥ 0 and the quantity of Good Y be y ≥ 0. The utility function is given below: u(x, y) = xy + 2y. Assume that the consumer has income m and that prices are på and py. (a) Explain whether the preferences underlying this utility function satisfy completeness and transitivity. (b) Explain whether the preferences underlying this utility function satisfy monotonicity and convexity. (c) Find the consumer's Marshallian demands for Good X and Good Y at prices px > 0 and Py > 0. (d) Show that goods X and Y are normal goods and explain whether either good is a substitute for the other. (e) Assume that px 10, Py = 5 and m = 100. Suppose that px increases to px = 15, how much of the change in demand for Good X is via the substitution effect and how much is via the income effect? Note: You may assume an interior solution (i.e. x > 0 and y> 0). =Question 10 If look at the indifference curves and budget constraint for two goods, X and Y, we can find a new points on a consumer's demand curve for good X by Group of answer choices shifting the budget constraint so that both intercepts change. pivoting the budget constraint so that the Y-intercept stays put, but the X intercept changes. pivoting the budget constraint so that the X-intercept stays put, but the Y intercept changes. keeping the budget constraint the same, but changing the indifference curve.
- 1) Explain the following: i. UTILITY ii. UTILITY FUNCTION iii. LAW OF DIMINISHING MARGINAL UTILITY. iv. Given a consumer has a money budget M = 360 and utility function U(X, Y)=X^(3/4)Y^(1/4). If she consumes two goods x and y with prices given by Px=10 and Py=30. Find the QUANTITIES of X and Y that MAXIMIZE her utility.With diminishing marginal utility, how do consumers decide how much to consume? Students are expected to give a detailed answer to this question. You must include an explanation about what diminishing marginal utility means in your answer. Concepts such as "budget constraint", "more is better", "utility". "marginal utility", and "marginal utility per dollar spent" must be used in your answer. No graph or calculation is required in this question.Q: A consumer’s preferences for food (F) and clothing (C) are given by U(F,C) = F0.2C0.8. The price of food is $4, and the price of clothing is $8. The consumer has an income of $3600. a) What is the utility maximizing choice of food and clothing? b) How would the utility maximizing choice change if price of clothing increased to $14? c) Given the answers to the previous parts plot a linear approximation to the demand function for clothing.